Tougher this time

The numbers appear to confirm this story. Although LPs still need to find a place to park their capital and Asia remains an attractive growth market, provisional data from AVCJ Research shows that regional fundraising is a comparatively anemic $2.8 billion so far this year - and half of that comes from Affinity Equity Partners' first close. Around $9.8 billion had been raised by the same point in 2012, but it's worth noting that much of it went into renminbi-denominated vehicles.

The fundraising world can be divided into "haves" and "have nots." What we have seen over the last few years is a small number of large GPs accounting for an ever larger share of the overall pie. In 2010, the 10 largest funds attracted 27% of total capital committed to Asia. In 2011, it rose a touch to 28%, but this was a bumper year for fundraising. In 2012, when overall fundraising was similar to the 2010 level, the top 10 GPs took a startling 46% of the pool.

There are some well-documented trends at work here. Institutional investors are looking to consolidate their GP relationships, committing more capital to a smaller number of players; and they are backing stable teams known for delivering consistent returns. Bear in mind that the 2013 figure doesn't yet include the $3 billion from KKR's expected second and final close on its $6 billion second Asian fund.

Other funds have been lagging a bit behind, but this is not unique to Asia. Permira's recent announcement that it was reducing the fundraising target for its latest global fund from EUR6.5 billion ($8.5 billion) to EUR4-5billion may be a harbinger of things to come. Indeed, a number of firms have lowered the lofty standards set in the previous cycle before the global financial crisis.

I've also met with a number of LPs in the past few weeks. They claim to be busier than ever before, given that GPs are trying harder to build relationships with a view to securing commitments.

While the larger players are focused on issues outside of primary commitments, such as increasing their co-investment levels and reducing fees, the smaller and more entrepreneurial fund-of-funds are looking more closely at country and/or sector-specialist GPs. The big funds are "getting too big," they say.

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• Topics
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